Kenya’s Mwalimu National Sacco has acquired 100 percent ownership of the trouble-ridden Spire Bank in a tactical move to eventually offload the shares to a strategic investor after close to six years of clinging to an investment that went bust.
The giant teachers’ Sacco finally edged out business tycoon Naushad Merali from the bank in a share-purchase deal deemed as the ticket for attracting deep pocketed investors with much-needed resources and expertise to turn around the loss-making third-tier lender.
Spire Bank’s acting managing director Brian Kilonzo told The EastAfrican that the transaction, which was completed at the end of November, now lays a solid foundation for the struggling lender to attract a strategic investor and kick start its long recovery process.
“This now allows onboarding of a strategic investor to inject funds to ensure regulatory compliance and execution of business growth strategies already developed. This is actively being pursued by the board of directors and shareholders,” said Mr Kilonzo in an e-mail response.
Whether the exit of Mr Merali — the previous majority shareholder and founder of the bank — from the ownership of Spire bank will pave the way for a strategic investor remains to be seen.
The Sacco, which spent Ksh2.4 billion ($21.81 million) on 75 percent of the shares in the bank owned by the billionaire businessman in 2015, has concluded the acquisition of the remaining 25 percent.
The Sacco management declined to disclose the value of the transaction but conservative estimates put the deal at Ksh800 million ($7.27 million) going by the value of the previous acquisitions in which it paid Ksh1.6 billion ($14.54 million) and Ksh750 million ($6.81 million) for 51 per cent and 24 percent stakes respectively.
Previous attempts by Mwalimu Sacco to sell its stake in the bank collapsed after the suitor — UK-based crypto lender BlockBank — abandoned the deal after expressing initial interest in 2018.
A review of the bank’s books of accounts shows that customers have withdrawn over Ksh9 billion ($81.81 million) worth of deposits from the bank over the past six years (2015-2020), with total deposits falling to as low as Ksh4.82 billion ($43.81 million) in the third quarter of this year from a high of Ksh14.3 billion ($130 million) in 2014.
Loans and advances to customers reduced by Ksh7.16 billion ($65.09 million) to Ksh2.9 billion ($26.36 million) from Ksh10.06 billion ($91.45 million) while net losses worsened to Ksh783.58 million ($7.12 million) from Ksh326.43 million ($2.96 million) in the same period.
The bank’s accumulated losses amounting to Ksh8.13 billion ($73.9 million) have pushed it into liquidity and capital deficiencies with total shareholder funds turning to negative Ksh1.32 billion ($12 million) during the nine-month period to September 30, while core capital operating in a negative territory of Ksh2.36 billion ($21.45 million) compared to the statutory limit of Ksh1 billion ($9.09 million).
Mwalimu Sacco’s investment in the bank has raised eyebrows within the country’s investment circle, with close to 75,000 teachers crying foul over an investment that was carried out without proper due diligence and which has put their hard earned savings at risk.
Mwalimu’s Sacco’s initial investment of Ksh2.4 billion ($21.81 million) in the bank has since been diluted to as low as Ksh1.2 billion ($10.9 million).
Our efforts to secure comments from Mwalimu Sacco Chief Executive Alphonse Kaio proved futile as our calls and text messages to his mobile phone went unanswered.
Spire Bank initially operated as Equatorial Commercial Bank, prior to its acquisition and eventual rebrand by Mwalimu Sacco
Mwalimu Sacco’s acquisition of Spire bank had been opposed by various agencies until they gave their approvals in 2014.
The Co-operative Alliance of Kenya — the umbrella body of about 15 million-member co-operative movement — raised a red flag over the credibility of the entire transaction, arguing that due process was not followed.
However, even with the opposition the deal was sanctioned by the Central Bank of Kenya, Competition Authority of Kenya and the Sacco Societies Regulatory Authority.